Tuesday, July 14, 2020

Morning Note: Never-Changing Human Nature -- And -- Don't Hold Your Breath

Asian equities traded mostly lower last night, with 10 of the 16 markets we track closing in the red. Same for Europe so far this morning; 14 of 19 bourses trading lower. In the U.S. the Dow (thanks in no small measure to JP Morgan and Boeing), up 70 points as I type, is bucking declines in the Nasdaq (-1.3%) and the S&P 500 (-5%). The Russell 2000 is flat to start the day.

The VIX (SP500 volatility) remains dangerously elevated at 33.24, up 1%, while VXN (Nasdaq volatility), up 7.2%, continues to scream risk in the Nasdaq names.

Oil's off .6%, gold's down $12, silver and copper are both taking a hit, down 2% and 1% respectively, and ag is mixed, with a slightly green tint.

The dollar's off .1%.

I'm once again reading Galbraith's detailed accounting of the period leading up to and beyond the 1929 crash. While that's not my analog for today's market, it -- as do all of history's boom/bust events -- indeed provides insight into never-changing human nature. 

The first quote below pretty well explains what's taken us to present levels:
"It is another feature of the speculative mood that, as time passes, the tendency to look beyond the simple fact of increasing values to the reasons on which it depends greatly diminishes. And there is no reason why anyone should do so as long as the supply of people who buy with the expectation of selling at a profit continues to be augmented at a sufficiently rapid rate to keep prices rising."
In assessing whether the market's gotten ahead of itself (read bubble), you look for signs such as:
"...at some point in the growth of a boom all aspects of property ownership become irrelevant except the prospect for an early rise in price. Income from the property, or enjoyment of its use, or even its long-run worth is now academic."
Any stocks come to mind? Tesla, maybe?

"Never-changing human nature" is of course exhibited cycle after cycle among those who wield political and policy-making power:
"Andrew W. Mellon said, “There is no cause for worry. The high tide of prosperity will continue.” Mr. Mellon did not know. Neither did any of the other public figures who then, as since, made similar statements. These are not forecasts; it is not to be supposed that the men who make them are privileged to look farther into the future than the rest. Mr. Mellon was participating in a ritual which, in our society, is thought to be of great value for influencing the course of the business cycle. By affirming solemnly that prosperity will continue, it is believed, one can help insure that prosperity will in fact continue. Especially among businessmen the faith in the efficiency of such incantation is very great."
Well, in the time it took me to pen the above stocks have performed a u-turn and, for the moment, are heading higher. The Dow's up 230 points and the S&P is now positive by .2%. The Nasdaq, however, is still down, but only a half-percent, and the Russell 2000 now trading up .4%. 

The VIX has turned down to the tune of 3.5%, that's a positive sign for stocks (although at 31, it in no way spells relief!). VXN, on the other hand, is still up over 4% on the morning, that's a resoundingly negative sign for all things Nasdaq...

Don't hold your breath on anything right here...

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